Financial Crime World

Financial Institutions and Listed Businesses Must Verify Customer Identity

In an effort to combat financial crimes and ensure transparency, the Financial Obligations Regulations of 2010 have introduced new regulations requiring financial institutions and listed businesses to verify the identity of their customers.

New Regulations for Financial Institutions and Listed Businesses

According to the regulations, financial institutions and listed businesses must obtain at least two forms of identification from among those listed in regulations 15 and 16. This includes:

  • Full name
  • Permanent address
  • Date and place of birth
  • Nationality
  • Nature and place of business/occupation
  • Occupational income
  • Signature
  • Purpose of the proposed business relationship or transaction
  • Source of funds
  • Any other information deemed appropriate by the financial institution or listed business

Additional Requirements for International Transactions

In cases where the applicant for business acts or appears to act on behalf of a customer based in another country, the financial institution or listed business may only process a transaction under this regulation if there are reasonable grounds for believing that:

  • The applicant is regulated by an overseas supervisory authority
  • The applicant is based or incorporated in a country where there are laws that give effect to the revised Forty Recommendations and Nine Special Recommendations on Terrorist Financing of the Financial Action Task Force

Exceptions to Identification Requirements

The regulations also provide exceptions where financial institutions and listed businesses do not require steps to obtain evidence of identity, including:

  • Carrying out a one-off transaction with a third party under regulation 13
  • In connection with a pension scheme taken out by virtue of a person’s occupation or contract of employment

Verification of Directors, Officers, and Beneficial Owners

Financial institutions and listed businesses must also verify the identity of:

  • Directors and other officers of a company
  • Partners of a partnership
  • Account signatories
  • Beneficial owners
  • Sole traders

by means of documentary evidence.

In addition, they must obtain relevant information about the trust, including verification of the trustee’s identity, in cases where trusts are involved.

Politically Exposed Persons (PEPs)

The regulations also require financial institutions and listed businesses to put appropriate measures in place to determine whether an applicant for business, account holder, or beneficial owner is a PEP. If such a person is found, further due diligence measures must be conducted in accordance with this regulation.

Due Diligence Procedures

In the event of any discrepancies in information previously provided by a customer, financial institutions and listed businesses must:

  • Perform due diligence procedures
  • Make every effort to obtain the correct information
  • Discontinue any business relationship with the customer if the information cannot be verified
  • Report the matter to the Compliance Officer

Transparency and Accountability

The regulations emphasize that financial institutions and listed businesses must not keep anonymous accounts or accounts in fictitious names and must identify and record the identity of customers in accordance with this part.

By implementing these measures, financial institutions and listed businesses can ensure greater transparency and accountability in their business dealings.